Think You've Got No Tax To Pay Until January?
When you pay your taxes by Self Assessment, you've got more than just the January 31st deadline to worry about.
The "payment on account" system was supposed to be HMRC's way of helping you spread your tax payments out over the year. Sadly, in reality, it's become the financial equivalent of the small child kicking the back of your cinema seat and ruining the whole film. Don't get frustrated, don't panic and, most importantly, don't get caught out by the July 31st deadline.
In accounting, you try very hard to get your numbers right. You want to avoid making estimates and keep everything pinpoint-accurate. That's one of the reasons so many find payments on account frustrating. They're based entirely on HMRC's guesswork of the tax you'll owe next year.
Here's how it works:
That's the theory, at least. In reality there's often a bit of push-and-shove in the numbers. Whether you're a Limited Company or a Sole Trader, it's unlikely that you've ever made the exact same amount of income, or had the same expenses, two years running. If your income varies a lot from year to year, your payments on account will probably be pretty far off the mark. If they're on the low side, you'll need to make another balancing payment. If they're too high, you'll need to claw some back from HMRC. As always, you're looking at painful penalties if you miss a deadline, so don't get caught on the hop.
If you know in advance that you'll have less tax to pay in your next Self Assessment return, you can apply to have your payments on account reduced. You need to be sure of your footing here, though - and again, you're adding some guesswork to your taxes. If your estimate's too low, you'll end up paying interest and penalties for underpaid tax.
You can check the state of play at any time by logging into the Government Gateway.You'll see exactly what you have to pay there, along with the deadlines. If you've got questions, the best thing to do is give RIFT a shout.
Phone or email for answers or advice - and always listen out for more Voices from the RIFT...